5. You are the accountant for a small donut shop that specializes in making your own world famous donut called 'Special Rounds'. Your boss, the owner, is great at making 'Special Rounds' but not great at understanding some of the financial issues. He came into your office to get your help. He does not understand why he is spending more money and why has a loss. He raised the price of the donuts, cut back hours and people by approximately 2 full-time people but still seems to be more and more behind. He wants you to explain it to him. You put together the following information and are about to analyze the data. 1. The budget is to make 2,308 donuts daily, 7 days a week, every week during the year. 2. The standard price per oz. of material is $1.00. 3. The standard amount of material for each 'Special Round' is 1 oz. of material. 4. You actually made and sold 756,100 'Special Rounds' for the year. 5. You actually used 831,710 oz. of material. 6. You paid a great price for the materials of $0.95 per oz. 7. Your standard rate of pay is $10 per hour. 8. Your standard number of employees is 10 people, each working 40 hours per week, every week of the year. 9. Due to new regulations and laws you now pay $15 per hour. 10. You cut everyone's weekly hours to 35 hours per week, every week of the year and now only have 9 employees. A) Compute the direct materials variances: price and quantity and total variances for the year. Indicate whether each variance is favorable or unfavorable. Show details and use the format learned in class to earn the points. (9 points) Hint: AQ x AP AQ x SP SQ x SP B) Compute the direct labor variances: rate and efficiency and total variances for the year. Indicate whether each variance is favorable or unfavorable. Show details and use the format learned in class to earn the points. (9 points) Hint: AH x AR AH x SR SH x SR C) Explain the reasons for any and all variances (rates, quantities, efficiency). (6 points) Use an attached page. Review the hints on the next page. 5. You are the accountant for a small donut shop that specializes in making your own world famous donut called 'Special Rounds'. Your boss, the owner, is great at making 'Special Rounds' but not great at understanding some of the financial issues. He came into your office to get your help. He does not understand why he is spending more money and why has a loss. He raised the price of the donuts, cut back hours and people by approximately 2 full-time people but still seems to be more and more behind. He wants you to explain it to him. You put together the following information and are about to analyze the data. 1. The budget is to make 2,308 donuts daily, 7 days a week, every week during the year. 2. The standard price per oz. of material is $1.00. 3. The standard amount of material for each 'Special Round' is 1 oz. of material. 4. You actually made and sold 756,100 'Special Rounds' for the year. 5. You actually used 831,710 oz. of material. 6. You paid a great price for the materials of $0.95 per oz. 7. Your standard rate of pay is $10 per hour. 8. Your standard number of employees is 10 people, each working 40 hours per week, every week of the year. 9. Due to new regulations and laws you now pay $15 per hour. 10. You cut everyone's weekly hours to 35 hours per week, every week of the year and now only have 9 employees. A) Compute the direct materials variances: price and quantity and total variances for the year. Indicate whether each variance is favorable or unfavorable. Show details and use the format learned in class to earn the points. (9 points) Hint: AQ x AP AQ x SP SQ x SP B) Compute the direct labor variances: rate and efficiency and total variances for the year. Indicate whether each variance is favorable or unfavorable. Show details and use the format learned in class to earn the points. (9 points) Hint: AH x AR AH x SR SH x SR C) Explain the reasons for any and all variances (rates, quantities, efficiency). (6 points) Use an attached page. Review the hints on the next page
